SEC chair’s remarks on the future of the U.S. shareholder proposal process are “deeply concerning”

Freedom to Invest

U.S. Securities and Exchange Commission Chair Paul Atkins’ recent comments pointing to the end of the shareholder proposal process are “deeply concerning,” as such changes would be an abdication of the agency's investor protection mandate.  

The practice of filing shareholder proposals has a long history, gaining prominence in 1942 with the introduction of a version of SEC Rule 14a-8, which investors and companies rely on to ensure a fair and balanced process. Proposals are almost always non-binding, even when they receive a majority supporting vote, meaning companies are not legally required to act on them. Still, they have led to the broad adoption of governance best practices and risk mitigation policies essential for long-term value creation.  

Atkins’ recent statements in Delaware indicate that the agency will seek to reform the shareholder proposal process dramatically. 

Andrew Collier, Director, Freedom to Invest, said: 

“The shareholder proposal process has been a cornerstone of investment stewardship and good governance for decades. The process helps protect the retirement savings of tens of millions of Americans from financial risks that threaten corporate bottom lines. If the SEC intends to break longstanding precedent and deprive shareholders of their traditional input into corporate decision-making, then the agency should solicit public comment. The SEC should not make dramatic shifts in policy without allowing investors to voice their practical and economic concerns as fiduciaries acting in the best interests of clients and beneficiaries”.

Freedom to Invest brings together investors, companies, and other stakeholders to champion the freedom to consider all material financial risks in their decision-making. Learn more here.